Everything to Know About Earthquake Insurance for Condo Owners

The image illustrated the damage caused by earthquake insurance and the importance of having earthquake insurance for Condos.
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The stunning beauty of the pacific northwest could bring anyone to their knees. So could the extreme risk of earthquakes in the region, as the west coast boasts earthquakes at dangerous levels.

These major events have brought down buildings and resulted in billions of dollars in property damage.

Despite the high risk in British Columbia, the province has ruled that the government will not offer aid for damages caused by earthquakes. In a public statement, BC explained that there is a high availability of private earthquake insurance—for people to purchase with their standard residential insurance policy. In response, the government has stated that it doesn’t need to provide financial aid in the event of an earthquake.

In other words, you’re on your own. This reality should concern you, especially if you’re not well-versed in insurance lingo and don’t know where to turn. To help, we’ve taken the time to offer you this short guide. Read on to learn about condo insurance coverage and how earthquake insurance will provide that necessary additional help.

Basic Condo Insurance Coverage

Owning a condo is a great way to enjoy life in British Columbia. However, when it comes to insurance, it can quickly become complicated. Due to the type of building and unique living situation, condo owners have different needs than homeowners. 

One of the main differences between homeowners and condo insurance is how much the policy needs to protect. When you own a home, you’re responsible for both the inside and outside—including the land, garage and any other structure on the property. However, when you own a condo, you’re typically only responsible for the interior of your unit and your personal property. 

Strata insurance is the insurance coverage that applies to shared properties. Corporations that own buildings with common areas must keep strata insurance plans. This covers the building and common areas, but not the contents kept on the property by those who live there. Therefore, condo insurance exists to cover the gaps left by strata insurance.

What Does Condo Insurance Cover?

In general, condo insurance covers several different aspects of condo living. This insurance takes into consideration personal property and all of the expenses that come with living in a condo environment.

For example, condo insurance covers all of the belongings that you keep and use at your condo. This includes your electronics, valuables, clothing, furniture, and appliances.

These plans will also cover some living expenses in the event that a disaster prevents you from living in your condo. For example, they’ll pay for expenses such as alternate accommodations and meals.

If you plan on doing any renovations or upgrades to improve your condo, an insurance policy can also cover these changes. Materials and supplies being used for the upgrades are then considered when calculating the replacement cost of your unit, should something happen to it. 

Finally, the insurance plan should cover liability and loss assessment. The liability coverage will protect you in the event that someone gets injured, or damages property while at your condo. Loss assessment will contribute to your share of expenses if the strata insurance policy fails to cover losses in the building. 

Any items not listed here will come out of your pocket. You’ll be responsible for any damages and losses that you do not find coverage for through further insurance policies.

Cost of Insurance

Ask any insurance brokers: the cost of insurance takes into consideration the level of risk for certain events in your area and for your living situation. Buying insurance should never be about picking the cheapest policy. Insurance is more complicated than simply picking it based on price.

A cheap policy most likely doesn’t cover as many items as others, or simply does not offer the same limits. 

When comparing policies, remember to consider the various coverage that each policy includes, as well as the additional (optional) coverages that are either included or excluded. Also, keep in mind the deductibles and the premiums that you may be responsible for.

When looking for a policy, set your standards for the amount of coverage you need and the specific coverage options you require. Make sure that when you’re comparing the different policies, that the policy you select includes coverage for all the specific elements you require. 

For example, is your Strata Water Deductible limit adequate for what the strata corporation requires? If you live in a building with frequent water back-ups, does your policy cover that particular item. Remember, when it comes to your insurance policy, the cheapest is hardly even better.

You can alter the cost of your insurance by choosing to pay a different deductible. For example, should you decide to select a higher policy deductible, you will benefit from a lower premium and vice-versa. You will inevitably pay higher premiums should you decide to opt for a more extensive insurance policy that covers a greater number of items. Do your research and weigh your options for which risks you are willing to take.

Condo insurance in British Columbia can be quite inexpensive, depending on a number of factors. They are the value of contents you wish to insure, the age of your building, your own insurance history and the various coverages your strata requires you to have. You can expect to pay anywhere from $400-$700 a year, but rates could be significantly higher if there are higher strata water deductible limits. 

Adding Earthquake Insurance

With a basic understanding of condo insurance, you’re probably wondering what happens in the event of a natural disaster hitting our area. A standard condo insurance policy does not cover earthquakes. It’s typically an optional coverage that you need to add to your standard coverage. 

An average of 3,000 earthquakes can occur in British Columbia each year. While most of them are not even felt, there are occasional trembles that cause some damage to homes. That said, we live in a very earthquake-prone part of the world, and experts regularly warn us that the ‘big one’ can happen at any time. As such, going without earthquake coverage in BC is a serious risk.  

As a result, 60% of people in the lower mainland of the province opt-in for the policy.

As a condo owner in British Columbia, it’s very important you consider adding earthquake coverage to your policy as you should cover yourself before a major event.

What Does Basic Earthquake Insurance Cover?

Earthquake insurance is coverage to protect against earthquakes. In other words, any flooding or fires that happen following an earthquake are typically not included under this coverage option.

Damages and expenses from earthquakes can be covered under three categories:

  • Dwelling coverage
  • Personal property coverage
  • Additional living expenses
  • Earthquake loss assessments

In general, earthquake coverage protects against any expenses regarding rebuilding your property and replacing belongings that were damaged due to an earthquake. Dwelling coverage will help pay for repairs and rebuilding the structure and property. Personal property coverage will help pay for damaged belongings like appliances and furniture.

In addition, if your place is deemed unlivable due to the earthquake, the policy will cover living expenses—to a certain limit—until you can move back into your place. These living expenses include hotel rooms, meals, and lost rental income. 

Any other damages deemed unrelated to the earthquake, such as fire or water damage from flooding, will have to be covered by other parts of the policy, or go uncovered. 

Other events such as sinkholes, tsunamis, and rain damage are typically also not be covered under the earthquake coverage. Earthquake coverage typically also doesn’t apply to vehicles and/or other equipment.

How Do Earthquake Insurance Deductibles Work?

Like with most other insurance policies, you’ll need to pay a deductible before your insurance coverage picks up the rest of the bill. Most policies that have earthquake coverage added function based on a percentage deductible rather than a fixed dollar amount. In other words, you are responsible for paying a percentage of your expenses in the event of an earthquake.

Choosing a higher percentage deductible means getting a better deal on your insurance premiums. But it also means that you’ll need to be prepared to pay a lot more out of pocket in the event of an earthquake.

On average, deductibles can start at 5%, but some insurers may expect you to pay between 15-20% deductibles for the earthquake deductible. These deductibles will certainly be on the higher end if you live closer to a fault line.

For comparison, if your dwelling coverage limit is at $300,000, then paying a 15% deductible will mean you’re responsible for $45,000 before they pay the rest.

In addition, many insurers will separate homes from belongings. In that case, you’ll have to agree to pay a percentage of expenses for your home and belongings separately. Thankfully, personal belonging coverage typically doesn’t require as high of a deductible as your structure, and you won’t have to pay a deductible on living expense claims.

When it comes down to it, adding earthquake coverage to your policy will make it significantly more expensive. When you choose to live in a high-risk area, you likely have to come to terms with the fact that opting for earthquake coverage on your policy typically adds 25-35% to your insurance premium. 

In unique cases, you can work with your insurer to bring down the cost. InsureBC offers earthquake buy-back insurance, a policy that allows you to pay one flat fee to lower your earthquake deductible in the case of a major event.

Is Earthquake Insurance Worth It In British Columbia?

The benefits of earthquake coverage outnumber the risks for most residents. British Columbia is one of the highest risk areas in Canada, as approximately 3,000 of the 5,000 yearly earthquakes in Canada affect British Columbia.

The Insurance Bureau of Canada reports that Canada has two seismic zones that only cover a small percentage of the country, but 40% of Canadians live in those zones. Research finds that the costs of earthquakes at a 9.0 magnitude in British Columbia would be $75 billion in damages. 

The Canadian government has studied the chances of future earthquakes to assess the risks of damage. They found that there is a 30% chance within 50 years that a major earthquake will strike. This earthquake will have the magnitude necessary to cause significant damage to British Columbia. 

Despite these startling numbers, a good portion of BC residents does not feel that buying earthquake coverage is important. Many choose to put it off, as they don’t think a major earthquake will happen anytime soon. It’s possible that the frequent occurrence of minor or unnoticeable earthquakes has desensitized residents to the risks. 

The Global Risk Institute responded with an alarming study, alerting Canada that the country is unprepared to handle any losses that would come with a major earthquake—despite being among the highest risk countries for earthquake devastation. 

If there was ever a time to opt for earthquake coverage, it’s now.

Purchase Condo Earthquake Insurance

As a British Columbian resident, you shouldn’t ignore the warning signs. B.C. is the highest risk area to live in when it comes to major earthquakes. Your basic condo insurance policy will not cover the catastrophic damages to your building or your possessions, as a result of an earthquake. 

At InsureBC, we help our clients to prepare for the worst by offering earthquake coverage as optional policy add-ons. In the event that you suffer a major loss from an earthquake, we will make sure you have the coverage needed to help you pick up the pieces.